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July 12, 2007
"Faith" In Free Trade?
Don Boudreaux
The blogosphere doesn't lack for good commentary on this article that appeared in yesterday's New York Times -- an article that suggests that (1) the vast majority of economists are advocates of laissez faire, and that (2) those few economists who dissent from this dogmatic position are treated as scum by the rest of the benighted profession.
Alex at Marginal Revolution hits this nonsensical nail square on the head, and Greg Mankiw makes some important points.
I weigh in here only to express my on-going problem with Dani Rodrik's complaint (also featured prominently in the NYT article) that most economists have a "faith" in free trade -- a faith that keeps us from looking at arguments and evidence on trade with open eyes and minds. Because Rodrik isn't blinded by any such faith, he (he implies) is a more objective scholar.
I don't want here to rehearse debates over the meaning of the term "faith." I would say that I have no "faith" in free trade; rather, the evidence and the theory of free trade are powerful enough to convince me that it is practically superior to any form of protectionism if the goal is widespread prosperity. Faith is required when neither evidence nor theory support whatever proposition you choose to (or happen to) believe. Even if Rodrik is correct about the errors and oversights of traditional trade theory and evidence, it is an unjustified smear to say that those who accept these as the basis for supporting a policy of free trade do so as a matter of "faith."
But my problem with Rodrik's position runs even more deeply. If it's true that theory and evidence in favor of protectionism are sufficiently strong to warrant economists abandoning their conclusion that free-trade policy is generally sound, then why shouldn't economists -- led by Dani Rodrik -- also start exploring the potential benefits of intra-national protectionism? Surely a scholar not benighted with the free-trade "faith" ought to take seriously the possibility that, say, Tennesseeans could be made wealthier if their government in Nashville restricts their ability to trade with people in Kentucky, Texas, Rhode Island, and other states?
Indeed, such an objective scholar should be open also to the possibility that residents of Nashville can be made wealthier if their leaders restrict their ability to trade with people in Knoxville, Memphis, Chattanooga, and other locales in that state.
I suspect that if someone proposed to Dani Rodrik that he explore the wealth-creating potential of state-level protectionism, he would refuse. He would likely (and correctly) say that it's ridiculous on its face to suppose that such protectionism would make the people of Tennessee as a group wealthier over time. If my suspicion is correct, then to what would Rodrik himself attribute his out-of-hand dismissal of the notion that Tennessee tariffs might well make Tennesseeans richer? Would he realize to his chagrin that he is a benighted, faith-based non-scholar? Or would he instead understand that the case for an extensive, market-driven division of labor is so strong -- and that the political border that separates Tennessee from other states is so economically meaningless -- that it would be as pointless for a serious economist to explore the economic potential of Tennessee protectionism as it would be for a serious oncologist to try to cure a patient of cancer by bleeding that patient with leeches.
Posted by Don Boudreaux in Economics, Myths and Fallacies, Trade | Permalink
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Comments
You make some excellent points Don. I might add that Europe may serve as just an excellent case study given the rise of the European Union. Ironically, as beholden to socialism that most of Europe is, the largest steps of progress have come not from protectionist policies but rather from liberalizing many of their trade and labor policies.
Ireland has made significant progress in terms of economy by benefiting from loose immigration and labor policies that allow workers to move relatively freely within Europe.
Estonia, formerly ruled by Russia, has made the most significant gains by turning more towards a market economy - and this brought about by a guy who read a couple books by Milton Friedman. If we were to treat the European Union as a single country and each country as a state within the EU, it would give us an excellent vantage point to consider how successful protectionism has been to Europe and why Europe has begrudgingly treaded towards a freer economy between member states.
The view that we (Americans) currently hold is somewhat bizarre as most Americans define themselves as Americans rather than members of the state in which they come from or call home. This more nationalistic view I think is evidenced by the downward spiral of state's rights over time here in the US. The EU really looks as if it is beginning to mimic the US by trying to form a "federal" (wrong word, but in comparison) system of government. But because each member state in the EU has been fully independent for so long, it has had a difficult time finding the traction to become as powerful as our own federal government. In a way, I think the founders who supported states rights would still see this part of Europe as a strong model for which America should be if they were still alive today. While I don't care for much of Europe's policies in terms of social issues, it is the one place where Europe, if viewed as a single government entity like the US, shines.
Posted by: colson | Jul 12, 2007 4:06:45 PM
...was it ?5306 Oak Street?
:)
Posted by: shawn | Jul 12, 2007 4:34:20 PM
I believe that I have faith in free markets. It probably biases my views on many subjects, even outside economics. It's not that there's no evidence or that I haven't looked at it, but if a situation is presented to me, I'll almost always favor the free market solution.
If I was given a choice between living in an utopian completely government-run economy with 100% chance of 3% growth forever or a utopian free market economy with no certainty of growth (even with a sub 3% average), I'd go with the latter. I think that would qualify as "faith."
Posted by: Jason | Jul 12, 2007 5:05:52 PM
I don't know, Jason. I still don't think it's faith - even in your unrealistic example.
Command economies are known to produce goods with no value to the consumer. This means that more often than not, they produce output such that the sum of the parts is worth more than the whole. Output is up but the output is crap because the system is incapable of adjusting to consumer's individual wants and needs. So, wealth is destroyed even when they show output "growth".
Market economies ebb and flow but, in aggregate, they don't destroy wealth, they create it. There is plenty of empirical evidence that command economies create poverty and market economies create wealth - to say nothing of the value placed on personal freedom. You know this, so you choose the uncertainty of markets. That's not "faith", that's just good reasoning.
Posted by: methinks | Jul 12, 2007 5:19:44 PM
Don Boudreaux wrote: "...if the goal is widespread prosperity."
There's no evidence whatsoever that prosperity is a goal for those who don't have the free trade faith. The words prosperity and wealth do not appear in the NYT article. On the other hand, words like "inequality" and "ecosystem" do appear. Therefore, you're simply arguing starting with different premises about attaining different goals.
Posted by: Bret | Jul 12, 2007 5:29:01 PM
Canada has interprovincial trade barriers...I wonder whether they'd serve as model.
Posted by: Eric Crampton | Jul 12, 2007 6:15:14 PM
That was the best post I have ever. I just had a 4 hour argument with my friends yesterday about this. They were trying to convince me that we should put in protectionist measures against China to benefit the US AND for the good of Chinese people.
Posted by: tim | Jul 12, 2007 6:17:05 PM
Brett has a point. There's nothing revolutionary or groundbreaking or particularly disturbing about methods of the "dissenters". They have different goals and are appealing to different audiences than say, consistent free market advocates. I don't agree with most of the goals of the self-labeled econ rebels. They tend to strike me as lacking historical perspective.
Free trade will always need a narrative to keep widespread public support. But we have far more citizens who are big beneficiaries of free trade than we did 30 years ago, and who ought to see the benefits as obvious. Over my career, probably 90% of my income has come directly from out-of-state (California) customers and about 1/3 from outside the country. I've never had regulators or tariff collectors reviewing or micromanaging those relationships, which has made them mostly inexpensive to enter and inexpensive to terminate. Without the Internet and my freedom to conduct business on it in my and my customers' mutual interest, I'd be working a crappy regular old job like my Dad and his Dad. Not that they'd tell you it was a crappy way to work, but it sure would be by my standards.
And hey, I can get bananas year round -- couldn't when I was growing up. I can buy a top of the line laptop for $2000 (even with the Mac premium). I spent $3500 in 1992 dollars on my first laptop 15 years ago. Isn't free trade amazing?
Posted by: Brad | Jul 12, 2007 6:23:10 PM
methinks,
I wanted to compare some future, unlikely scenario, where central planners had gotten their act together (I can't really imagine how that would work) in order to demonstrate that I'd chose (perhaps irrationally) free markets even at the cost of real GDP.
There are measures such as the freedom and material equality that really aren't "provable." I value the former highly, the latter very little. I think that's probably the crux of this debate. I'd trade Gini for more GDP all day long. Others would do the opposite. Perhaps that's not faith, but I don't know how I would prove my preference.
As for the article, the examples listed aren't very convincing and lack supporting details. If these are the best shots against free markets, it'd be a pretty boring debate:
"oil companies — not the natural workings of the market — determine gas prices"
"the federal deficit is a meaningless term because the federal government prints money in the first place"
"contrary to what free-market theory predicts, employment actually rose after an increase in the minimum wage"
Posted by: Jason | Jul 12, 2007 6:59:41 PM
Why stop intranational protectionism at the state level? Why not prevent anyone from trading with someone else, even within states?
That surely will bring in a new era of prosperity.
Posted by: kurt | Jul 12, 2007 7:06:59 PM
Hebrews 11:1 Now faith is the substance of things hoped for, the evidence of things not seen. (KJV)
The concrete evidence for the free market is overwhelming, so we don't have to "hope" for anything.
While one can only hope for prosperity when practicing non-free market economics.
So the protectionists, socialists, et al are essentially a bunch of religious nuts.
Posted by: Ray G | Jul 12, 2007 7:16:00 PM
Excellent, Don. I never tire of reading your blog. I hope George Mason realizes what a treasure they have in you.
Posted by: Bill Millan | Jul 12, 2007 7:23:19 PM
I have faith in the reliability of my perceptions and my capacity for reason.
Posted by: Sam Grove | Jul 12, 2007 7:42:42 PM
"There are measures such as the freedom and material equality that really aren't "provable." I value the former highly, the latter very little."
You value material wealth less because you're not faced with scarcity manufactured by command economies. People living with the scarcity resulting from command economies become extremely materialistic. In other words, your "faith" is shaped by your understanding of how well markets work. People who would trade GDP for gini would only do so in theory and out of extreme ignorance. Once they actually got more gini and less GDP, they would trade back. Face it, Jason, you choose rationally! You're a rational guy and you'll just have to find a way to come to terms with that :)
The article was ridiculous. The first two quotes you copied just illustrate that these whiners are bashed by fellow economists not because of their heterodoxy but because they're spewing bullshit. The minimum wage quote was just pure evil (Arnold Kling would have my head for making that type M argument but what else would you call it?)!
these bastards are saying that if the least employable in our society are forced out of a job by our egalitarian policies it doesn't matter. That guy - who is likely young and black - is irrelevant. These same lefties will, of course, later cry that there's no equality of opportunity in our country and rampant racism because this marginal black youth was discriminated against by evil capitalists and denied a job and the opportunity to learn a skill.
Here in New York City, the minimum wage increase has already resulted in fewer jobs for (mainly) black teenagers.
Posted by: methinks | Jul 12, 2007 7:52:08 PM
Intra-national protectionism is the latest fad among the left in Cambridge, Mass.
Small businesses in my neighborhood have taken to posting "Buy Local First" stickers in their windows. (I live down the road from Harvard). The propaganda leaflets that go with this effort talk about the benefits to the environment of not trucking products from all-over the country.
Of course, the "local" hardware store (great store, by the way), sells plenty of high-end European kitchen gadgets and appliances, and is a franchise of ACE Hardware, with it's extended supply chain. In fact, given the way manufacturing has been driven from New England by regulation, high wages, etc, I wonder if they sell anything of local origin!
Posted by: Andy Wagner | Jul 12, 2007 10:18:20 PM
There is a way to distinguish between reasonable confidence and blind faith. Blind faith is incapable of disproof. If you are sure that nothing could ever change your favorable or unfavorable opinion of free trade, then you have escaped from the world of facts into the tangled web of unthinking belief. It's quite a crowded place and is often trolled by politicians and pundits looking for an audience.
Posted by: David P. Graf | Jul 12, 2007 10:25:04 PM
...An article that suggests that (1) the vast majority of (historians, political scientists, engineers, computer scientists, surgeons, mothers, cab drivers...) are advocates of (primary sources, measured objectivity, the application of science, systemic thinking, evidence-based reviews, early bed times, taking 15th Street at rush hour...) and that (2) those few historians, political scientists, moms... who dissent from this dogmatic position are treated as scum by the rest of the benighted profession.
Isn't this just a bad article with a weak argument written by a lazy writer on a slow summer news day?
Posted by: Eric | Jul 12, 2007 10:50:41 PM
I believe that I have faith in free markets.
I don't need to have faith in free markets, because I don't treat markets as separate and obscure pie-in-the-sky entities as many muddle-headed economic ignoramuses do. The best way to envision a market is as a euphemism for an aggregation of free individuals making uncoerced decisions and actions regarding what they value. Once you divorce this definition from the mainstream connotation of markets as the triumph of the strong over the weak, and of Corporations Being Corporation-y, your analysis becomes as superfluous as the cognitive dissonance upon which your logic is based.
For many economists, questioning free-market orthodoxy is akin to expressing a belief in intelligent design at a Darwin convention
Hmm... Creationomists?
Posted by: Ben | Jul 13, 2007 1:01:43 AM
The most revealing feature of the Times opinion is the studied refusal to mention "prosperity" while making Marx's old anti-free trade argument.
Posted by: a Duoist | Jul 13, 2007 5:20:39 AM
I think the "faith" aspect comes in only in relation to the Progressive Idealist faith. That is, when the free trader says that free trade works, he isn't saying that it works for everyone, always and immediately, as he is well aware of the effects of, and need for, creative destruction. The Progressive Idealist requires that the system work for everyone, always and immediately, or considers the system to be flawed. So this person will point to the belief that creative destruction works out generally better for everyone, notes the exceptions, of which there are always several, and declares the belief in free trade to be a matter of faith. He or she is technically correct as what we believe about the future is always a matter of faith. What I would say is that there is a difference between a pragmatic faith and an idealistic faith, and of course, that pragmatic faith is better.
Posted by: Randy | Jul 13, 2007 10:13:59 AM
If you want to see a leftist embrace free trade just ask them why Cuba's economy is so bad.
Posted by: dismal | Jul 13, 2007 11:11:12 AM
The concept of "free trade" is imprecise, and at best, a contemporary misnomer. The contemporary use of the term seems to suggest lack of clarity, except with the implicit assumption that some amount of regulation or management is required anyway. The controversy then becomes: How much restriction or intervention is required or necessary, and on what basis should restrictions be made to foster the improvement of national welfare? We therefore no longer envisage "free trade," but "managed trade." Invariably apart from economic factors, health and strategic reasons have made it impossible to talk about a prestine and well defined concept of "free trade."
What is the logical extension? Not even untrammelled markets produce desirable outcomes[recall the Great Depression]. The elusive questions remain: How much intervention is necessary? why?
Posted by: Chris Warburton | Jul 13, 2007 12:01:42 PM
Chris...welcome. :) Check out the econtalk podcast on the great depression...
http://www.econtalk.org/archives/2007/06/shlaes_on_the_g.html
"shlaes on the great depression"
There's more than you're used to hearing, and there was a lot more government intervention leading to the great depression than you think. It seems to not have been a failure of the market, so much as a series of failures of government.
Posted by: shawn | Jul 13, 2007 12:14:56 PM
Chris,
I would say that a "free trade" is a transaction that consists of a value for value exchange between willing parties. That there are many, many "managers" linked to every transaction, like pilot fish on a shark, does not negate the existance of the free trade. Indeed, if the free trade did not exist, the "managers" would have to find some other way to obtain a meal.
Posted by: Randy | Jul 13, 2007 12:18:54 PM
David writes: If you are sure that nothing could ever change your favorable or unfavorable opinion of free trade, then you have escaped from the world of facts into the tangled web of unthinking belief.
Oh my. What you are saying, in effect, is that someone can be hurt by not having a captive audience or customer base. Your argument works well for 7th graders giving speeches in English class. But when you deny consenting adults the right to make their own choices about what to purchase and from whom, you restrict their freedom. This is definitional, not open to argument. By choosing to protect some supplier from competition, you necessarily hurt consumers, by denying them the benefits of their choice to do business with other suppliers. At the very least, if you're going to advocate for protectionism, acknowledge that the equation is zero sum. If you help one group of people, you are necessarily screwing another. Protectionism cannot be win/win.
Posted by: Brad | Jul 13, 2007 1:39:58 PM
"The concept of "free trade" is imprecise, and at best, a contemporary misnomer. The contemporary use of the term seems to suggest lack of clarity, except with the implicit assumption that some amount of regulation or management is required anyway."
Chris, I disagree. Free trade is when two people reach an uncoerced agreement to enter into a transaction. Where is the lack of clarity?
"The controversy then becomes: How much restriction or intervention is required or necessary, and on what basis should restrictions be made to foster the improvement of national welfare?"
There is only controversy if the lack of clarity you claim exists and you haven't made the case that it does. This same argument can be put to income distribution. From whom, to whom and how much? There is no objectively correct answer. Further, define "national welfare", please. You can't claim that "free trade" lacks clarity and throw around a meaningless term like that. I can't look after "national welfare" if it means different things to different people.
"We therefore no longer envisage "free trade," but "managed trade."
Right. We therefore no longer envisage a free market where people are left to make their own decisions but a "managed" and, by definition, centrally planned economy. How well have those worked out where they have been tried?
"What is the logical extension? Not even untrammelled markets produce desirable outcomes[recall the Great Depression]."
That is not the logical extension. The markets before and during the depression were not untrammeled. They were, in fact, increasingly trammeled and it was their repeated trammeling that caused a recession to turn into the Great Depression. The Great Depression came courtesy of our government - the very same one which is supposed to look out for our "national welfare" and "common good".
Posted by: methinks | Jul 13, 2007 2:41:10 PM
.... then why shouldn't economists -- led by Dani Rodrik -- also start exploring the potential benefits of intra-national protectionism? ........ Tennesseeans could be made wealthier if their government in Nashville restricts their ability to trade with people in Kentucky, Texas, Rhode Island, and other states?"
I'm no economist but I think the answer to that is obvious. Tennessee, Kentucky, Rhode Island ect all play by the same rules.
They don't allow child labor, they don't allow slave labor (as documented in Saipan). They also have some basic common regulatory procedures to follow that doesn't allow them to put ethylene glycol in your medicine or poison in your pet food. Free trade with no basic rules seems to be a race to the bottom IMO. We have standards.....are partners need to have them as well. If the standards are the same then free trade makes sense to me but otherwise it's exploitative.
Regarding non-conformist views, at least at the laymen's level, this board has shown me how even attempting to suggest something outside the "faith" gets you labeled a pariah, a Marxist, a troll or any other form of derogatory comment. Feelings run high when ideologies are held to scrutiny...I'm guessing some degree of this goes on at the professional level.
Also I find it hypocritical that so many "free-marketers" make the same arguments of discrimination in support of the global warming "skeptics". Ahh... when facts and ideology collides.....the facts never change.
Anyway here in Roma these people seem angry, skinny and 10 years behind us economically.... not an SUV in the whole city!!
Arrivederci!
Posted by: muirgeo | Jul 14, 2007 1:31:38 AM
Don -
I am an evolutionary scientist, and there is a continuous theme in the media that the theory of evolution by natural selection is an article of blind faith, that skeptics are beginning to doubt it, that important exceptions have been found, that someone has come up with a more sophisticated version of evolutionary change...
In reality, the theory of evolution by natural selection is itself continually evolving, becoming more complex and broadening its applicability. This is what successful scientific theories do.
I guess the same applies to market economics - at least that's how it looks from the outside.
Posted by: Bruce G Charlton | Jul 14, 2007 9:51:16 AM
Brad,
The point is not whether one favors or opposes free trade, but whether one is a "true believer". If no argument or set of facts could change one's position on an issue, then we're dealing with blind faith. Such people ironically often bring discredit or harm to the cause they espouse. Eric Hoffer has a good book out on the subject.
Posted by: David P. Graf | Jul 14, 2007 10:16:55 AM
"even attempting to suggest something outside the "faith" gets you labeled a pariah, a Marxist, a troll or any other form of derogatory comment. Feelings run high when ideologies are held to scrutiny"
No. Incoherent rants rooted in complete ignorance of even the most basic elements of economics gets you labeled ignorant. Using your ignorance to foam at the mouth and to assert a position while calling real economists like Albatross a "dunderhead" gets you labeled a troll. You've proven that you couldn't scrutinize your dinner, much less anything important.
"when facts and ideology collides"
When they collide in your head, toxic waste flows.
Given your general disorganized thinking, you probably won't understand this but I'm hoping for a miracle: If a doctor suggested bleeding a patient instead of medicating him as a cure or starving type I diabetics instead of injecting insulin, I suppose, in your view, the medical profession would be wrong to label him a quack. After all, you wouldn't want to call someone a who is "attempting to suggest something outside the faith" to be labeled a pariah.
Posted by: methinks | Jul 14, 2007 10:37:58 AM
The term "inequality" is used by the "heterodoxy" economists to describe the spectrum of individual wealth within an economic system.
How much different would the conclusions be if they examined the inequality between the average citizen in a free-market republic, versus the average citizen in a centrally-planned economy???
Posted by: True_liberal | Jul 14, 2007 10:57:12 AM
That's totally untrue David. There is no current argument or set of facts that could convince me that free trade is a bad idea. Why? Because I get tremendous benefits from being able to freely associate and exchange directly with people who are not in the United States. Global banking systems (including innovations like PayPal) make it mostly painless. Our tax system makes these relationships as seamless as the ones I have with people in other states, like Colorado and Kentucky. I add up my income from all sources, subtract expenses for creating that income, pay taxes, end of story.
You can manufacture any set of facts or any argument you like to restrict free trade among individuals, and if it adds resistance to my work flow or promotes an environment that makes it more difficult, it's a loser idea from my standpoint. Thanks to the Internet, inexpensive communication, and a rise in IP products, there are more and more people like me who are directly involved in trade with people in other lands. Protectionism directly restricts our freedom. Just trying to put a face on who the braindead protectionist ideas affect for you...
Posted by: Brad | Jul 14, 2007 11:13:34 AM
Well, it seems to have been lost in the shuffle, but the larger point is that the article is entirely misleading in its' basic statement that David Card & Co. are somehow the avant garde, beating back the irrational masses of economists who have only "faith" in some status quo academic theory.
So the topic of defining faith in some abstract context is really pointless.
The article started with a false premise (stated above) and then they implied that free-market economists have "faith" in their theories; making faith a pejorative and thus implying that free-markets don't really work, but that the majority of economists simply believe in them because that is the accepted orthodoxy.
Or, in other words, don't buy a car from someone who would make the kind of argument one finds in this article. It is dishonest, and purposely misleading.
Posted by: Ray G | Jul 14, 2007 11:14:25 AM
Brad,
I was just trying to make a point about blind faith. That's all. In a sense, it was irrelevant that I used free trade as an example since you can find "true believers" on both sides of many issues.
Posted by: David P. Graf | Jul 14, 2007 3:54:11 PM
I don't have faith in anything, nevermind the freemarket. Not the realiability of my perceptions and not my capacity of reason, I have no faith in any of it. However, I am not a relativist, it's just that knowledge of any kind doesn't need a foundation.
I find it strange that more people don't try and find out why Hayek was a critical rationalist, or more about the editor of The Fatal Conceit, W. W. Bartley (some say he practically wrote the book). If you do, you might just find yourself stumbling upon the solution to any accusation of faith, and a philosophy to compliment libertarianism.
Posted by: Lee Kelly | Jul 14, 2007 3:58:57 PM
Of some interest to this discussion is the hypothetical counterargument:
Suppose that a vast majority of economists really did believe in unfettered free-trade, which, based on work cited by Brian Caplan at Econlog, they obviously do not. Wouldn't it then stand to reason that if such a large majority of scholars in a particular field subscribed to a particular interpretation of the facts, then being a lone star with a crazy theory would, in most cases, really just mean that you are indeed crazy.
I think that scientists, and the public at large, have quite a romantic view of history, as being filled with singular geniuses proposing radical idea after radical idea against the overwhelming opposition of their fields. This view holds that only with the adoption of these new radical theories does science really progress. It demands a sort of selective amnesia to discount all the millions of rejected quack theories that did not get written into our history books and to assume all fanatics to be right. This becomes especially unlikely if the ideas being proposed are OLDER than those that are commonly accepted. Most fields typically don't discount old, correct, notions only to replace them with new, misguided, ones.
I think you could replace "free-trade" with "evolution", and "protectionism" with "intelligent design" in the original article and this becomes pretty apparent.
Posted by: Wojtek G | Jul 14, 2007 4:23:51 PM
muirgeo,
I often get the point you bring forward in favour of protectionism: free trade allegedly only works if everyone plays by the same rules.
However, in my opinion, it depends on the way you look at human cross-border interaction in general. Your point applies only if you look at nations as "groups" or "collectives" trading with each other.
I prefer to look at the trading partners as individuals who happen to be from different countries: Say, Mr. muirgevic Dostojevksy, Mrs. muirgea Bünzli, Joe muirgeo Sixpack, Hippocrates Muirgelopoulos and Javier Muirgeoso-Herandez want to freely trade with each other. Should they really be prevented from doing so just because their respective government bureaucrats could not agree on a "common set of rules"?
As to the danger of a "race to the bottom" in terms of health, labour or environmental standards, I think there's such a thing as consumer awareness. In fact, regardless of my free-market convictions, I buy "like a tree-hugging leftie" ;-) - favouring organic, local produce, trying to avoid products fabricated under dubious ethical circumstances, preferring fair-trade products. That's my choice as a consumer, and thanks, I am quite happy making these choices myself, I don't need the government to "help" me in that.
Posted by: Christian Flury | Jul 14, 2007 4:34:32 PM
On Muirgeo's level playing field, I pay as much in property taxes on my car as some people in other state pay on their homes. I would say that the "level playing field" argument definitely justifies protective tarriffs to help us here in the northeast as we try to compete with the undertaxed and underregulated southern and western states.
How ironic it is that Muirgeo's protectionist rant is written from Italy, where his consumption benefits foreigners at the expense of the US hospitaility industry. It was a beautiful day today in Newark, NJ. They have a lot of old buildings there too, but thanks to people like Muirgeo given their "choice", their hospitality industry suffers.
Posted by: The Dirty Mac | Jul 14, 2007 9:17:38 PM
David, I hope you see why your premise is false. One can certainly be in a position where nothing could ever change one's opinion about his right to trade freely with people who don't live within the same political boundaries. I'm in such a position. And my support for my freedom to trade is not blind faith, it's been a good chunk of my income for my whole career.
Posted by: Brad | Jul 15, 2007 2:21:10 AM
muirgeo's claim that standards must be the same or else trade is exploitative is bad economics. It fails to consider what people are doing now. If one guy is banging steel together under lousy conditions, and one guy is banging wood together under lousy conditions, and they trade to get wood/steel, that's not exploitation. If somebody comes in from the first world and offers them another choice of jobs, if they accept the job, then clearly they think it's an improvement over what they currently do. How can THAT be exploitation, when trading with each other is not exploitation?
It beggars the imagination to call it "exploitation" when you make people better-off.
Posted by: Russell Nelson | Jul 15, 2007 2:33:31 AM
"It beggars the imagination to call it "exploitation" when you make people better-off."
Posted by: Russell Nelson
"On this trip, I've had sex with a 14 year-old girl in Mexico and a 15 year-old in Colombia. I'm helping them financially. If they don't have sex with me, they may not have enough food. If someone has a problem with me doing this, let UNICEF feed them."
-Retired U.S. Schoolteacher
Free trade right? No exploitation?
Posted by: muirgeo | Jul 15, 2007 3:17:05 AM
Muirgeo,
Are you such a hopeless moron that you can't tell the difference between pedophilia and free trade? How much did they have to lower the academic standards to admit you to medical school? I'm just curious. More proof that the AMA needs to be abolished.
Posted by: methinks | Jul 15, 2007 9:00:42 AM
Muirgeo,
When was the last time any government adopted protectionist laws in order to uphold ethical standards or combat unethical exploitation rather than to please powerful domestic lobbies or trade unions?
In famous cases (Shell, Nike, etc.) in which ethically dubious production practices were changed, the reason was consumer protests rather than protectionist government intervention.
Posted by: Christian Flury | Jul 15, 2007 9:31:59 AM
Brad,
Are you saying that you believe in free trade because it benefits you financially? If so, then that's fine. If an economic system doesn't deliver the goods, then there's not much to be said for it. Would you have a different opinion, though, if you were one of the "losers"?
Posted by: David P. Graf | Jul 15, 2007 11:29:14 AM
Muirgeo,
These past few months of watching you embarrass yourself has been both entertaining and depressing. Your ability to fool yourself into thinking that you have good points is hilarious. But you don't listen to reason, and rarely think more than 1 step beyond your words, which is depressing.
If I ever again respond to you in any shape or form (after this ditty), may I be chopped up and served into soup - Finding Nemo.
Maybe the school teacher thought NAFTA meant "Need A Fit Teen Ager?" Yes, free trade is evil. Nobody ever took advantage of other people until Milton Friedman walked the earth. Under a system of more regulations this would never have happened. Regulations, my boy, it's the future.
We could make sure that no Americans have enough money to travel outside the country, or at least not enough so that when they get there they won't be able to pay for sex.
And in case I am being too literal with your allegorical anecdote, I wonder how you can compare "trade" versus having sex with the under-aged. Yes, all trade is equivalent to rape. Before we trade with anyone we need to make sure that both parties pass the eHarmony compatibility test to ensure fair and equitable relations that is promised to all human beings when they enter this world.
It's the US's fault for keeping other countries so poor that they even have to trade with us in the first place - under our terms, right?. Perhaps you should be looking at the economic conditions of the country where the girls were forced to make a decision to coagulate (sic) with Mr. Teacher. Perhaps you can solve their problems first, and Mr. Teacher will have nowhere to go except to the "Made in America" prostitutes.
Farewell, slot-brained jabberwookie!
Posted by: Python | Jul 15, 2007 2:09:01 PM
was Mankiw's important point that he wants to impose a massive $1 gas tax and that he is therefore not an advocate of laissez-faire? just checking
Posted by: mankiwcommie | Jul 15, 2007 2:11:02 PM
Are the poor Tennesseans aware of how much more they have to pay for their orange juice because of those specific duties imposed on orange concentrate imports, and that sometimes represent more than 70% ad valorem…just so that the holding costs of the orange groves in Florida are kept low until these are turned into malls at great profits? If the Tennesseans are not aware…should they be made aware?
Posted by: Per Kurowski | Jul 15, 2007 2:31:48 PM
Does anyone understand WTO? Everyone declares faith in the free trade only to thereafter negotiate themselves out as much as is possible from the supposed blessings.
With respect to free trade I have always felt that when the development countries are invited to these nudist camp they better make sure it is a true nudist camp and not just one populated by drooling Peeping Toms. If it is not a true free trade nudist camp then they are perfectly right in at least dressing up in some fig leaves. Alternatively they could create their own true free trade nudist camp and invited developed countries who really believe in free trade nudism.
Posted by: Per Kurowski | Jul 15, 2007 2:33:54 PM
don't get me wrong, I am on your side on free trade.
But we do have the several examples of highly successful development strategies in Japan and East Asia as well as the US in its' early history developing rapidly behind significant protectionist barriers. Now they may have developed better without the barriers, but that is an unknown counterfactual thesis. But what we do have is sufficient good cases to the contrary that you can not automatically reject the hypothesis.
Moreover, in recent years there has developed within main stream economics a different theory of comparative advantage
centered around the concept of the first mover developing sufficient economies of scale behind a protectionist barrier to crease a genuine comparative advantage.
Your theory takes comparative advantage as a given and does not considered the possibility that it can be changed -- often by government actions such as we have repeatedly seen in East Asian high tech industries.
Posted by: spencer | Jul 15, 2007 4:21:35 PM
No, David, I am not saying I believe in free trade because it benefits me financially. And I am most definitely denying it's "blind faith". Being able to trade and work freely with people in other countries is a necessary condition to a good chunk of what I do. It allows me to see how other Americans trading and working freely with people of other countries yield benefits to Americans who are not directly touched by such arrangements. I'm a specific case of why your original premise is bogus.
Your concept of losers of free trade is weak. If I enumerated and explained each of the times I "lost" in my career, I could come up with a bunch of things to gripe about and plenty of motivation to just give up and not "win" again. Big public companies changing direction after a bad quarter, little companies not paying bills in a timely manner, VC funded dot-coms not having viable business plans, egotistical founders, customers who moved the bar on requirements, software piracy, script kiddies with press releases promising an open source version of what I'm selling, etc. OK, kidding about the last one...
I know that most people work for other people and feel like their employer has some level of obligation to them. So, yeah, it hurts when you're no longer needed because your position is obsolete or can be done cheaper by a machine or a foreign worker. That's the breaks. Especially in IT and services. To feel entitled to a job that likely didn't even exist 10 or 15 years ago seems delusional to me. When you benefit from rapid change, you have got to future proof yourself so ongoing change doesn't drown you.
Posted by: Brad | Jul 15, 2007 4:32:25 PM
muirgeo, Strangely, this week, China banned the use of diethylene glycol in toothpaste. The pressure to do this came about because of free trade. Strangely, perhaps even counterintuitively to some, engagement with others helps them see things from your perspective. Not two weeks ago, China was saying that diethylene glycol was harmless in small amounts.
I bet there is an interesting study to be done on "net safety achieved", contrasting the drug approval process of the FDA to the brutal market feedback that Chinese producers have received in the wake of the dog food and toothpaste scares.
Posted by: Brad | Jul 15, 2007 5:09:30 PM
Brad,
It's obvious from your last comment that you have good reason to support the concept of free trade and you are definitely not a "true believer". I hope that you are able to continue to "future proof" yourself as I hope will be the case for myself as well.
Posted by: David P. Graf | Jul 15, 2007 9:38:51 PM
In famous cases (Shell, Nike, etc.) in which ethically dubious production practices were changed, the reason was consumer protests rather than protectionist government intervention.
Posted by: Christian Flury
muirgeo, Strangely, this week, China banned the use of diethylene glycol in toothpaste. The pressure to do this came about because of free trade. .......
Posted by: Brad
Good points. Thanks. I'm a novice on the issue and very open to the idea that free trades economic benefits are as obvious and factually supported as things like evolution and anthropogenic climate change. I'll do more research and see if I can find any other counter-arguments and will look for replies to spencers well made points.
Posted by: muirgeo | Jul 15, 2007 9:42:12 PM
It seems to me that everyone, of either conviction here is missing the real point of the article. The NYT is a Socialist mouthpiece rag not deserving of comment. Let's move on and read something else.
Posted by: Steve Campbell | Jul 15, 2007 9:50:48 PM
The United States is a single country. Free interstate trade has a net benefit for the United States.
Free international trade may have a net benefit for the world, but if the benefit is, hypothetically, +5 for China and -1 for the U.S., there's an example where a net benefit for the world doesn't mean there's a benefit to the United States.
So your interstate trade example is a straw man argument.
Posted by: Half Sigma | Jul 15, 2007 10:37:20 PM
Would you have a different opinion, though, if you were one of the "losers"?
Posted by: David P. Graf | Jul 15, 2007 11:29:14
That question goes right to the heart of the issue. Its the "veil of ignorance" argument - the assumption that we would or should choose equality over opportunity to ensure security. Personally, I'd rather live in a world of opportunity than in a world of equality, primarily because I see equality as an unstable condition that would not bring the imagined security.
Posted by: Randy | Jul 16, 2007 10:53:21 AM
My favorite aspect of this debate is that Brad DeLong had to eat his words:
The knockout punch, of course, is that Dani Rodrik's country whose "labor force that is producing at low levels of productivity" is doing so because it has lousy political institutions: it lacks the "constitution... judiciary, nation-wide financial regulation, and free flow of labor" that have underpinned economic growth in the rich post-industrial core. The poor country is poor because its government is incompetent, and corrupt.And yet Dani wants--in this situation--to enhance and extend the role and powers of the poor-country government by asking it to implement an active protectionist industrial policy because "there exists a bunch of arguments having to do with learning and (domestic) market failures under which subsidization of tradable activities could speed up your economic growth."
As Lant Pritchett put it once: "there is nothing as catastrophic as state-led development led by an anti-developmental state." Any argument to commit a government to an active protectionist industrial policy must be accompanied by arguments about why the government will be capable and effective in this role when it has not been capable and effective in its primary roles of establishing property rights, providing tolerable administration of justice, building infrastructure, and providing education.
So I score this for Don: a knockout.
Posted by: Patrick R. Sullivan | Jul 16, 2007 12:22:26 PM
I just read this from Dr.Hurd.com which reminded me of this thread.
"The purpose of interventionist government is to make all things equal in condition--not just under the law, but in condition. The underlying premise is that under freedom and liberty you have inequalities of condition--and that this is a BAD thing. Some are richer than others, some are smarter than others, and some are happier than others. The amazing arrogance of interventionism is that government SHOULD, and even COULD, correct what people are unable/unwilling to correct in their condition of freedom. The consequence of this arrogant contradiction is that interventionism--in proportion to the degree it is implemented--leads only to equal conditions of stupidity; equal conditions of poverty; and equal conditions of misery. "
Posted by: Greg | Jul 19, 2007 1:58:18 PM
If there IS a free trade orthodoxy, equivalent to a darwinian natural selection orthodoxy, and if critics of free trade are treated like creationists, isn;t this a good thing, for the same reason creationists are treated as pseudoscientists?
I wish it was true, but is it?
Posted by: Saul | Jul 23, 2007 3:58:36 PM
"It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a 'dismal science.' But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance."
-- Murray Rothbard
'nuff said.
Posted by: Arend | Jul 24, 2007 7:45:27 AM
Half Sigma:
Your decision to call one example valid & the other a straw man is entirely arbitrary. You could apply the same reasoning to either example & reach the same conclusions. How, precisely, do they differ?
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